Investment Advice: Mutual Funds For Beginners

Here is some mutual fund investment advice for beginners. A professionally managed investment option, a mutual fund is an easy, low cost way for individuals and institutions to add diversification to their portfolios. Mutual funds pool the money of many, many investors to buy stocks and/or bonds in various companies in accordance with the fund’s stated investment objective. In general, the more individual securities you own, the lower your exposure to risk.

Mutual funds come in many shapes and sizes. Through a mutual fund, you can invest in stocks or bonds or a combination of both. Perhaps you want exposure to a particular area of the market such as healthcare or financials. You can also choose an active management style - one which is based on a stated investment strategy and process, or passive - one in which there is no input from a manager and often times, the fund will track a specific market index.

While it’s tempting to invest in the fund that boasts the greatest, latest performance, this strategy often backfires. Consider the following when choosing the best fund for you:

  • Investment objective and philosophy
  • Risk profile
  • Tenure of management
  • Fees and expenses

Also think about the amount of time you plan to own the fund. Mutual funds are usually regarded as longer term investment choices. There may be tax implications should you sell a fund with a capital gain. And, like all investments, money allocated to a mutual fund could result in a gain or a loss.

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